Private jet business travel. Who uses it and why?

Date added: May 13, 2012

In a long article on who is using private business travel, and why, ABTN gives a lot of information on how the industry works. Private flying has fallen significantly since 2008 and the financial crisis. The banking sector used to use more business jets when they launched new IPOs (initial public offerings) when executives wanted to make many presentations in different places, the same day. They also say companies want the private space on the plane to continue their discussions, as well as the very fast transfer from car to plane, and plane to car, with the minimum of hassle. Rock bands etc, now make a higher proportion of their money from tours, so they like using private jets for painless travel. And the remote locations where some natural resources and minerals are found are more quickly accessed by private flights to small airports, rather than large planes to main airports. And more ….

Special report: private jet business travel

While the hatches remain battened down on corporate travel budgets, why is the private jet sector seeing “green shoots of recovery”?Paul Revel reports

“Exclusive” – there’s an overly and often inaccurately used word, along with the much-abused “unique”. However, for once both may apply here at Farnborough airport in Hampshire. Owned and run by TAG Aviation, it’s the only airport in the UK exclusively for private jets: no hobby aircraft, no commercial flights, nothing with more than 30 passengers.

And it does indeed feel exclusive; the stylish black-and-white terminal lounge looks more like a chic boutique hotel than an airport (of course, if you want a chic boutique hotel, as private jetsters sometimes do, the TAG-owned Aviator is just across the runway). Gleaming Gulfstreams, Learjets and Falcons roll up to the plate-glass windows, disgorging their VIP passengers. More expensive hardware shelters in 240,000sq ft of spotless hangars.

The airport boasts heritage and glamour: Samuel Cody piloted the first powered flight in Britain here in 1908, and more recently it starred as a location for James Bond in Quantum of Solace. TAG has invested more than £100 million in the airport in the last 10 years, opening the award-winning Reid-designed terminal in 2006, and buying the freehold from the MoD in 2008.

PAYING THE PRICE

But let’s cut to the chase: while most corporates are haggling over maximum hours in economy, switching to no-frills and generally tightening travel purse-strings, who on earth is using private jets – and why?

I put the question to TAG Aviation (Farnborough) area director Ashley Namihas. He says: “An IPO ** [initial public offering] is a good example of where a senior leadership team needs to do a roadshow, flying into sometimes three cities in one day. It’s a cost-to-value ratio that really works. The price is a miniscule part of the overall costs of an IPO – the fees for auditors, underwriters and so on have gone up 17 per cent since 2005. Then try and measure the importance of the team using the jet as a conference room, ready to be at their best when they hit the ground. It’s a huge step in a company’s life. Also, the schedule can change by the hour, and you simply couldn’t achieve that timetable using commercial flights.”

A travel buyer for an international investment bank cites similar advantages for a hectic itinerary of meetings when the stakes are high. He says: “One of the biggest advantages is avoidance of all the unnecessary delays at commercial airports, leaving schedules undisrupted. These jet services are available 24/7, 365 days a year. You don’t have to follow a time schedule – the jet will take off as per your requirements.”

So if the finance sector is a mainstay of private aviation, is everyone in the business struggling to survive after the 2008 financial crash? Another travel manager in the banking sector tells me they now only keep a relationship with a jet provider for any emergency contingencies that might arise.

“In terms of general traffic, we saw a slump in 2008,” says TAG’s Namihas. “But demand is returning, though not quite back to 2008 levels, which was a culmination of a 10-year boom. We’ve seen 5-10 per cent year-on-year growth since 2008. The IPO is one form of roadshow, but, of course, there’s lots of others: senior management may need to make regular visits to several factories around the world, for example. It’s quite a popular modus operandi – recruiting less senior people but making them more mobile.”

He says TAG’s spread of business – owning, managing, maintaining and chartering aircraft for and to a diverse range of individuals and Fortune 500 companies – has helped cushion it against the volatility of the markets. “Oil-and-gas is a big part of our business. Having a duty of care to employees in this area is a core principle – private aviation is safe, and you can control your environment and security. TAG has been through the International Association of Oil & Gas Producers (OGP) audit process, and we train other operators on best practice.”

IN THE CITY

My next touchdown is the Jet Centre at London City Airport (I arrive via Docklands Light Railway, rather than the Gulfstream I’d hoped for). Its proximity to London’s financial heart must surely be both a strategic trump card, and a liability when the banks take a nosedive.

Darren Grover is chief operating officer at the Jet Centre. He says: “We saw a niche market here at London City in 2002, and experienced massive growth up to 2007 – from nothing to 15,000 flights a year. But as 95 per cent of our business is in and out of Canary Wharf and the City, we got hit pretty hard. There was a sharp decline in 2008, and last year we had just 7,000 flights. But we are seeing the green shoots of recovery. It’s a very hard sector to forecast, but my best estimate, based on data trends, is that we’ll see around 7,500 flights in 2012.”

These signs of recovery are echoed in a recent report in The New York Times, suggesting a growth in investor appetite for European IPOs this year, citing two big instances in March raising around $2 billion; and the likes of Pricewaterhouse Coopers also talking about “green shoots”.

The Jet Centre is used by several key players in the market. Its biggest client is operator and fractional ownership specialist Netjets, which accounts for 50 per cent of business. Netjets has the largest of several smartly appointed private lounges, but the boutique-terminal’s creature comforts are not the point. “I don’t really want you in the lounge,” smiles Grover. “Because if you’re there I’m delaying you, unless it’s weather or some issue out of our control. We don’t sell anything tangible – it’s all about time.” I hear this from almost everyone in private aviation I speak to – where once status and prestige may have been the drivers, the old adage “time is money” now appears to be core to the whole sector.

Grover says the airport’s mission is to get departing passengers from car to plane in eight minutes, and vice-versa arrivals in six. “That’s our task, but if you turn up later, you’re not late – because it’s your plane and your schedule.”

So if the client rolls up an hour late, can you slot them into London City’s busy schedule and get them away pronto? Yes, says Grover…well, actually, he says a lot more than that, but to skirt around the techno-talk, the Jet Centre is linked into government-designated and EU-regulated firm Airport Coordination Ltd (ACL), which basically streamlines the airport’s slots to maximum efficiency. This is combined with an “electronic flight strip progressing system”, which cuts down admin and frees up air traffic controllers’ time, meaning a higher runway usage rate. What all this boils down to is that whatever time you roll up, Grover and his team will pull out all the stops to get you in the air ASAP.

HIGH-END CLIENTS

TAG’s Namihas says 10-15 per cent of its corporate business comes via travel management companies. So I talk to John Gianquitto, chairman and CEO of The Appointment Group, whose divisions – including Travel by Appointment and Music by Appointment – manage travel for often high-end clients in sectors including finance, sport and entertainment.

Gianquitto says: “Using private aviation is a way of saving huge amounts of time – though it can also be very cost-effective, too. It often makes sense from a financial perspective. For example, a day return trip from London to Nice for six passengers can cost around £8,000, which isn’t that far off six full business class fares. Factor in the time savings and it can become a much more competitive option.”

A travel buyer for a multinational engineering company agrees: “We regularly have to shuttle people between regional European and UK sites,” she says. “When, as is often the case, there’s no direct flight connection, it makes sense, cost- and time-wise, to use private charter. This can be the case whether it’s a small group of senior management in an executive jet, which we book through a broker, or for larger groups of employees, where we charter a commercial plane from an airline.” She also cites the hotel costs saved by one-day trips not possible via scheduled flights.

Gianquitto says private jet use is “really going from strength to strength” in the entertainment sector. “When artists are on tour and playing in a number of different cities it really comes into its own; multi-leg trips that would ordinarily see a lot of time wasted on advance check-in times, security, immigration queues, airport procedures and even indirect flights are much better managed by private aviation.”

Even the dark cloud of downloading and file-sharing hanging over the music industry has a silver lining for private jet providers. “With retail sales of music declining in the wake of the downloading trend, artists make a much higher proportion of their money from touring these days,” says Gianquitto. “So charter aircraft activity around the live music scene is a real growth area.”

Gianquitto’s views are echoed by Patrick Margetson-Rushmore, chief executive of London Executive Aviation (LEA), which owns and manages aircraft based in London City, Oxford, Farnborough, Luton, Biggin Hill and Stansted, as well as in Paris and Moscow. He says the financial services and IPOs business “fell off a cliff” in 2008, but the arts and entertainment sector remained steady, with LEA’s 12-14 passenger (plus plenty of stowage capacity) Embraer Legacy aircraft “very popular with bands on tour”.

However, Margetson-Rushmore says he’s seeing a return of the City boys and girls. “The recession changed the mix materially, with corporate financial business dropping massively. But over the last year we have seen change – the beginning of finance coming back. We started to see quotes growing from October 2010, and bookings increasing from February last year.”

Like Gianquitto and others, he cites instances where like-for-like cost comparisons can apply. “The key benefits are still there. If we’re working with large numbers it still makes sense, time- and money-wise, plus you factor in hotel costs saved by taking less time. And we’re starting to see again smaller groups needing to be at very early morning meetings – they can be back in their City office by the afternoon.”

EXPANDING BUSINESS

Thomas Flohr, founder and chairman of owner-operator Vistajet, agrees with the others that time-saving is a major factor, but says the remote locations occupied by natural-resource industries make them fertile ground for private aviation. “If you run a global mining operation, you may need to head to deepest Siberia – say, Irkutsk or Novosibirsk – then the next day you might have to be in Rwanda or Chad,” he says. “It’s technically not possible via other methods. Plus you’re dealing with security issues and accessibility. The mines are not in Moscow or Lagos – they’re in remote locations.

“The large corporations are looking to expand in remote locations, and you’ve got to go there and see it with your own eyes, in terms of what you’re buying or who you’re partnering with. The whole world is changing. For certain people in these organisations it’s about being available anywhere on the planet in the fastest possible time.”

It’s also worth remembering that reaching the right location doesn’t just apply to the wilds of Africa and Siberia; there are around 300 commercial airports in Europe – for private jets there’s a choice of 3,000, which several operators say can help achieve a tight schedule.

And then, as then-US defence secretary Donald Rumsfeld once burbled, there are the “unknown unknowns” – unpredictable situations where private aviation takes on a key role. A travel buyer in the finance sector says: “While usage of private jets has become minimal, we’ve certainly seen them come to their own in emergency or crisis situations. Then it’s about considering duty of care, whether repatriating employees because of a medical emergency, or dealing with other crises.”

Whereas for many people and businesses the Eyjafjallajökull eruption in 2010 was a logistical disaster, Travel by Appointment’s Gianquitto recalls: “During the volcanic ash cloud episode a number of high-level executives from different clients were effectively stranded in the US. We gathered them together in New York and chartered a private jet to fly them all to Barcelona, with chauffeurs waiting to take them on to London.

“After take-off, British airspace re-opened and we got the aircraft diverted back into the UK to Northolt. Our travellers were back in London when they might have still been waiting across the Atlantic for the passenger backlogs to clear.”

** Initial public offering (IPO) is an offering of stock or shares to the general public by a company which wants to raise capital for the first time. Following an IPO, the company gets listed and its shares are traded on stock exchanges.

Sometimes, the owner of a company, who holds most of the shares in a company, sells his/her holdings in the market to raise money for himself /herself through offer for sale of shares. Such offer for sale of shares is also known as IPO if this is happening for the first time and will lead to listing of the company on stock exchanges.